New Macau Gaming Law Mandates Operators Can’t Directly Invest in Each Other

The third version of Macau’s still in-the-works revised gaming laws will reportedly mandate that concessionaires and their biggest investors cannot directly invest in competitors, but they can indirectly own up to 5% of rivals.

MGM Cotai in Macau. New Macau gaming law features some investment restrictions. (Image: Macau Daily Times)

The stipulation on investors applies to those owning 5% or more of a particular concessionaire. In hypothetical example, an investor that owns 5% of Sands China shares wouldn’t be able to directly hold capital of Wynn Macau, assuming the gaming law is passed.

Concessionaires, as well as their shareholders holding 5% or more of their respective capital stock, may not directly hold [shares in another concessionaire] in their own name, but can indirectly hold shares of the concessionaire, for example, in the form of a fund, but not more than 5%,” according to a draft of the proposed mandate.

The six Macau concessionaires are Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Holdings and Wynn Macau. All six are tied to entities listed in either Hong Kong or New York.

New Macau Gaming Law Attempts to Quell Collusion

It’s not common for companies, regardless of industry, to directly hold stakes in rivals and when that situation arises, the investments are usually sold to unlock value for shareholders.

In Macau, officials apparently revised the gaming law draft in an effort to prevent potential collusion among concessionaires, according to Committee Chairman Andrew Chan Chak Mo.

The Second Standing Committee of the Macau Legislative Assembly met earlier today. A final meeting of the committee will be held on Wednesday, June 15.

“After signing the opinion letter, the Legislative Assembly will come together five working days later to discuss and vote on this law,” said Chan.

Macau’s Legislative Assembly could take up discussion on the gaming law as soon as next week with passage possible on June 26.

Other Details in New Macau Gaming Law

Another detail in the revised draft is that the actual holders of Macau gaming permits cannot become publicly traded entities. Currently, listed operators are structured as holding or parent companies of the license holder. The ban on the actual license holder going public is a new stipulation.

The revised bill doesn’t feature guidance on whether a public company affiliated with a Macau concessionaire can hold a cross-stake in an operator that also has exposure to the special administrative region (SAR). For example, the proposal, in current form, doesn’t outright forbid Las Vegas Sands (NYSE:LVS) from purchasing a stake in Wynn Resorts (NASDAQ:WYNN). That’s a hypothetical example.

The new proposal is clear in stating that an indirect cross-stake, such as one held by a fund, is permitted and can exceed 5%. That’s relevant to mutual fund and index fund issuers that own shares of the various Macau concessionaires and are forced to buy more of those stocks when prices appreciate if the funds they issue are weighted by market capitalization.

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